The 5 Rules of Credit Card Rewards You Need To Know (Before You Get Burned)

Credit card rewards can be very valuable, but there are a lot of mistakes you can make along the way.

How do I know? I’ve racked up close to one million airline reward miles in the past four years. But most of those rewards haven’t come from flying. They’ve come from credit card rewards.

These rewards can be extremely valuable if you use them right. For example, I flew round-trip from the US to India with stops in Nepal and Japan for just $120 plus taxes. The rest was covered by 80,000 frequent flyer miles, which I earned with nothing but regular spending on my credit card.

Not interested in racking up frequent flyer miles? Cash back and other rewards can also be worth hundreds or thousands of dollars, too.

I’ve made my share of mistakes along the way and learned some important lessons that cost me money. But that didn’t have to be the case. Before you sign up for various rewards credit cards, make sure you’re doing it right. Here’s my guide to finding and earning the best credit card rewards.

1. The best rewards credit card rewards the ones you’ll use

If you do decide to start earning rewards, be sure to get rewards you’ll actually use. Earning a lot of rewards from just anywhere isn’t worth your time and effort. Choosing the best rewards credit card means finding one that meets your needs—and skipping those that don’t.

For example, I earned around 80,000 airline miles from one airline credit card—miles that must be redeemed through this carrier. Three years later, I still have about 70,000 of those miles sitting in my account. The reason? The airline I would need to fly to redeem them isn’t a great fit for my travel habits.

Keep in mind that rewards can expire, too. Most last for at least a few years, but sometimes you don’t always get around to taking trips when you think you will. Once miles expire, they’re worth nothing to you.

2. Maximize rewards with a few tricks

Standard rewards include earning sometime like 1 to 2 miles per dollar spent or 1% cash back on purchases. While these rewards can add up, it’s a very slow way to earn rewards. Look at the math: Spending $10,000 on a 1% cash back card to get $100 cash back doesn’t get me very excited. Fortunately, there are better ways to earn.

Some of the most valuable rewards are introductory bonuses. This is where you might get something like 50,000 airline miles when you spend $3,000 on your new card within 3 months of opening your account. That’s almost 17 miles per dollar spent, which is much better than the average earning rate of 1 to 2 miles per dollar spent.

In addition to looking for introductory bonuses, you can earn higher percentages on cash back cards, too.

Many rewards programs offer extra miles or cash back if you shop through a portal. For example, Discover offers extra cash back on stores you likely shop at all the time. All you have to do is go to the website through their ShopDiscover page and use your Discover Card to check out. Some current offers include 5% back at Home Depot and Walmart, 10% back on Fandango and Macy’s, and 25% on ProFlowers. The list includes dozens more.

Cash back cards often feature promotions for certain spending periods. For example, the Chase Freedom card currently offers 5% cash back on all restaurants as well select retailers like Bed, Bath & Beyond and H&M from now through June.

3. Examine the fees

Rewards cards can come with more and higher fees than you’d find on other types of credit cards.

There are a few different fees to watch out for. Many times, rewards credit cards have higher interest rates than standard credit cards. Many rewards credit cards also charge an annual fee to use them. These fees are often around $100 per year—another cost that eats into the value of your rewards.

Before choosing a card, make sure you read the fine print and figure out which fees come with your card.

4. Redeeming rewards can be difficult

While rewards can be super valuable, especially on international and first-class flights, booking isn’t always easy. When I earned enough miles to fly to Thailand, I was excited—until I realized I had no idea how to use those miles to get there.

Your best bet is to understand how you’ll redeem rewards before you earn them. With cash back rewards, this is usually simple. Your cash back is often automatically credited on your statement without you needing to take action.

For airline miles, it can be more complicated. If you fly a certain airline regularly, you might already have an idea of where you can fly with the airline and how to redeem miles. But if you’re thinking about branching out beyond your normal preferences, be sure to read up on how the rewards process works.

For some guidance, check The Points Guy’s Beginner’s Guide. The Points Guy specializes in earning frequent flyer miles with lots of helpful resources for devising a strategy for yourself.

5. Be careful to avoid debt

It’s easy to get caught up in the credit card rewards game. I’ve been guilty of thinking, “Buying this $300 iPhone is expensive, but hey, at least I’m earning rewards to get it!” But this is the wrong way to think about it, and it can land you in financial trouble.

So how do you deal with this? Make sure you aren’t spending more just because you’re using a rewards credit card.

It’s not always an easy thing to do, but one way is to apply for only those rewards offers that you can meet without increasing your spending.

In any case, you should always be able to pay off your credit card bills in fulleach month. Credit cards have some of the highest interest rates—think 2 to 3 times or more than interest rates on student loans.

If you’re not able to pay off credit card bills every month, attempting to earn credit card rewards probably isn’t a good idea for you.

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